Grayscale Hires its Global Head of ETF After SEC Chair Pours Cold Water on Physically-backed Bitcoin ETF
ETF Veteran David LaValle said Grayscale is “in a unique position” because they “actually have a product in the marketplace, so it puts us in a great spot” while emphasizing that it’s now just a question of when and not if there's going to be a Bitcoin ETF.
Grayscale Investments, the world’s largest digital asset manager, has hired ETF veteran David LaValle as its global head of exchange-traded funds.
LaValle, the former CEO of custom index provider Alerian, will drive the effort to convert the $25 billion Grayscale Bitcoin Trust (GBTC) into an ETF, to which CEO Michael Sonnenshein has said they are “100% committed.”
“This is an inspired hire IMO as Dave has been key person at Nasdaq, State Street, and more recently Alerian,” commented Eric Balchunas, Senior ETF Analyst at Bloomberg.
In addition to the ETF head, the asset manager is seeking to fill at least 10 other related roles. Just last month, Grayscale partnered with Bank of Mellon for ETF services following GBTC’s conversion.
“We’re focused on creating a number of products to be a world-class ETF issuer.”
“We’re in a unique position. We actually have a product in the marketplace, so it puts us in a great spot.”
If converted, GBTC would immediately become the third-largest commodity ETF with $60 billion SPDR Gold Shares (GLD) being the largest and $29 billion iShares Gold Trust (IAU) in second place.
GBTC is currently a closed-end fund, and this lack of ability for shares to be redeemed is why it trades at such hefty premiums and is currently at an 11.84% discount. This discount is very likely to collapse once it is converted into an ETF, LaValle said.
Grayscale has been ramping up its efforts to build out its ETF arm even as the US Securities and Exchange Commission (SEC) is showing no signs of approving a single Bitcoin ETF yet.
“Despite the fact that there isn't a bitcoin ETF, it doesn't mean there isn't investor demand more broadly in the asset class.”
Support for the Unwanted
Meanwhile, US SEC Chair Gary Gensler gave a speech at the Aspen Security Forum on Tuesday where he shared that he is open to a Bitcoin ETF which complies with the SEC’s strict rules for mutual funds — one focused exclusively on Bitcoin futures, rather than a physically-backed one as the industry wants.
“SEC is like that one house on Halloween that gives out apples,” commented Balchunas on Gensler’s openness to a non-physical Bitcoin ETF.
.@JSeyff and I out with note today on how the bitcoin futures mutual funds will all be flops (altho we don't blame them for trying). The ProFunds one is out a week now and has a mere $500k. A bitcoin ETF would likely have a few billion at this point. pic.twitter.com/fj1zbUYGAO
— Eric Balchunas (@EricBalchunas) August 3, 2021
The problem with this is Gensler is basically “open to approving something that investors don't want,” Balchunas added, such a product will flop as seen with gold futures ETF DGL, which have less than 1% of the assets of physically-backed gold ETFs.
The Bitcoin Strategy ProFund is already experiencing this with only having a mere $500k worth of assets in a week. In comparison, the first bitcoin ETF approved in North America, the Canada-based Purpose Bitcoin ETF, amassed more than half a billion dollars in a week, which means in the US, these numbers could easily surpass a billion dollars.
“The “race” for bitcoin MFs, a weak undercard to the headline race for a physically backed bitcoin ETF. People forget NYDIG had a MF and it flopped,” said Balchunas.
“They are all going to flop. Gensler let these through because of the protections afforded by the 40 Act – and their ability to close if too much assets – but the irony is there won't be any investors in them to protect.”
While in the last eight years, the SEC has yet to approve a single Bitcoin ETF, LaValle is hopeful, much like the majority of the crypto industry, and believes “now we've gotten to a place where it's really not a question of if there's going to be a bitcoin ETF, it's just a question of when there's going to be a bitcoin ETF.”